Broker's price opinion

A broker's price opinion is the process used by a hired sales agent to determine the potential selling price[1] or estimated value[2] of a real estate property. A BPO is popularly used in situations where a financial institution believes the expense and delay of an appraisal is unnecessary.[1]

Involved parties

Broker's price opinions are initiated by financial institutions.[1] Examples are banks, mortgage companies, and loss mitigation companies.[3][4][5]

The BPO is performed by a real estate professional who is acting on behalf of the financial institution.[1] Such a professional could be a real estate agent, a real estate broker, an appraiser, or other qualified person.[2][1] Through BPOs, agents can improve their skills in property inspection, market evaluation, and property pricing.[6] At a price of US$50–150 per BPO,[5] the work can provide side income or steady income for real estate agents.[1] Agents may also create working relationships and a rapport with financial institutions.[1][7] Some BPO agents work through a BPO company that provides a single point of contact to the client and oversight of agents and their reports.[1]

Uses of a BPO

A financial institution may order a BPO for:

Overview of the BPO process

A real estate agent or a broker is hired to complete a BPO report on a property. A BPO may be occasionally requested without a fee in hopes that the financial institution, bank, or lender will receive a sales listing for the property.[1]

The BPO professional then conducts the investigation. Many factors affect the price of a property:

The result is a brief report, usually two or three pages in length. This report includes analysis of the property and neighborhood, photographs, comparable properties ("comps"), and local and regional market information.[1][10]

Types of BPOs

A broker may do a drive-by BPO or an interior BPO.[3] In drive-by BPOs, the professionals do not have access to the interior of the property;[5] they rely on exterior appearance, neighborhood information, comparables, and other documentation.[10] The interior BPO is more in-depth; it requires advanced contact with the property's inhabitants, evaluation of the interior and exterior, measuring to verify room dimensions, and additional photographs.[5][11]

Comparison to other kinds of value analysis

Automated valuation model

In an automated valuation model (AVM), a computerized mathematical model evaluates basic features of the property, compares to area sales, and determines a rough value. The calculation takes into account information about property size, bedrooms, and bathrooms. An AVM is a basic evaluation – "just to make sure that the property value is in the right ball park" – and may be replaced by a full real estate appraisal.[9] Because an AVM does not involve a site visit, it does not include factors such as condition or upgrades.[8]

Comparative market analysis

An individual who is looking to sell or purchase a home might request that an agent perform a comparative market analysis (CMA)[8] to determine a reasonable listing price or offering price.[12] The process of deciding a CMA price is similar to a BPO.[1] However, a BPO – whether the exterior drive-by BPO or the full interior BPO – is more thorough than most CMAs.[13]

Real estate appraisal

Unlike a BPO professional, a real estate appraiser must be licensed or certified in most countries. A BPO is less thorough than an appraisal, although the process of deciding a price is similar to a residential real estate appraisal.[1]

See also

References

  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 "BPO Defined". National Association of Broker Price Opinion Professionals (NABPOP). Retrieved February 28, 2015.
  2. 1 2 3 4 "Broker Price Opinion - BPO". Investopedia. Investopedia, LLC. Retrieved February 28, 2015.
  3. 1 2 Kimmons, James. "All About The BPO or Broker Price Opinion". About.com. Retrieved 3 July 2011.
  4. 1 2 3 4 Kimmons, James. "When is a BPO or Broker Price Opinion Used?: Who Might Call You for a BPO and Why". About.com. Retrieved February 28, 2015.
  5. 1 2 3 4 Kimmons, James. "The Two Major Types of BPO or Broker Price Opinions: What Are Drive By and Internal BPO's?". About.com. Retrieved February 28, 2015.
  6. ↑ "Income doing Broker Price Opinions - BPOs; Increase Skills as a Real Estate Professional". National Association of Broker Price Opinion Professionals (NABPOP). Retrieved February 28, 2015.
  7. ↑ Ventolo, William L., Jr.; Williams, Martha R. (1992). The Art of Real Estate Appraisal: Dollars and Cents Answers to Your Questions (Paperback). Dearborn Financial Publishing Inc. pp. 25–73. ISBN 0-79310-207-3.
  8. 1 2 3 "Realtors® Should Embrace Online Data, Educate Consumers about Valuations" (Press release). New Orleans: National Association of Realtors. November 8, 2014.
  9. 1 2 "During my mortgage loan application process, I was given three or four different valuations. What do all the different valuations mean?". Ask CFPB. Consumer Financial Protection Bureau. May 5, 2014. Retrieved February 28, 2015.
  10. 1 2 3 4 5 6 Kimmons, James. "What is Involved in a Drive By BPO or Broker Price Opinion? The Drive By BPO is a Bit More Than the Name Implies". About.com. Retrieved February 28, 2015.
  11. 1 2 3 Kimmons, James. "What Is Involved in an Internal BPO or Broker Price Opinion?". About.com. Retrieved February 28, 2015.
  12. ↑ "Responsible Valuation Policy". National Association of Realtors. February 16, 2012.
  13. ↑ Kimmons, James. "NABPOP - The National Association of Broker Price Opinion Professionals: A Professional Association with Training and Certification". About.com. Retrieved February 28, 2015.
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